CCMBasePayStructuresFinal PDF

Base Pay Structures: How to Design an Accurate and Effective Compensation
Foundation
FEATURED FACULTY:
Doug Sayed, Founder and Principal, Applied HR Strategies, Inc.
(425) 827-3881 x701
doug@appliedhrstrategies.com
Peter Scontrino, Consultant, Scontrino-Powell, Consultants in Employee
Selection, Performance Management, and Organization Effectiveness
(425) 392-5694
peter@scontrino-powell.com
Speaker Bios
Doug Sayed, Founder and Principal, Applied HR Strategies, Inc.

Doug Sayed, founder of Applied HR Strategies, has over 25 years of professional and
management-level experience in human resource and compensation management.
Doug is an instructor, occasional author and technical reviewer for WorldatWork, the
largest professional association for compensation professionals. He was also published
nationally in the WorldatWork publication "WorkSpan" for the first time in 2004, and then
again in 2009.
He has worked in variety of responsible human resource roles, including head of HR for
a software company, as a regional HR manager for a S&P 500 company, as a
compensation and benefits manager, and as HR manager for the IT operations of a
major bank. He has substantial experience in compensation and benefits, performance
management, recruiting, employee relations, EEO, organizational development,
management training and development.
While Doug's experience spans the field of HR management, he has particular expertise
in the development of compensation strategies and programs, especially for technologydriven organizations. His expertise extends to most areas of compensation, including
base pay, sales, incentive or variable compensation, stock options and equity strategies,
as well as executive compensation.
Peter Scontrino,Consultant, Scontrino-Powell, Consultants in employee selection,
performance management, and organization effectiveness
M. Peter Scontrino, a graduate of Seattle University and Michigan State University,
holds the Ph.D. degree in industrial-organizational psychology. He is a licensed
psychologist in the State of Washington. Born and raised in the State of Washington, he
served on the faculties of the University of Washington and Seattle University prior to
forming Scontrino-Powell.
Dr. Scontrino is a widely recognized expert in the application of the principles of
industrial-organizational psychology to people and organizations. He has served as an
examiner for the Washington State Quality Award. He has assisted his clients in
projects ranging in scope from employee selection and performance appraisal systems
to productivity incentive plans to employee involvement systems to management
development programs to organization-wide change efforts.
Dr. Scontrinos consulting practice has taken him from Canada to Mexico and from the
United States to Italy. His clients cover the gamut from Fortune 100 companies to five
person operations. He has published a number of articles and has co-authored a text on
performance appraisal. He is a past director of the Washington State Psychological
Association and of the Pacific Northwest Organizational Development Network.
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BasePayStructures:HowtoDesignand
AccurateandEffectiveCompensationStructure
PresentedBy:
DougSayed,SPHR,CCP
andPeterScontrino,PhD
Introduction
AppliedHRStrategies
CompensationConsultingFirm
Compensation Consulting Firm
BasePay,Incentives,Equity,ExecComp,SalesComp
Offerhighquality,customizedconsulting
Reputable referralbased&ongoingclientbase
DeveloperoftheStrategicPaySeries
HandsonToolkits
Instruction,tools&templatestoDoItYourself
Noneed(orminimalneed)forConsultants
StrategicPaySeries2010
AboutthePresenters
DougSayed,SPHR,CCP
PrincipalConsultant&founderofAppliedHRStrategies,Inc.
Principal
Consultant & founder of Applied HR Strategies, Inc.
MastersDegreeinHRManagement
25yrs.HR&Compensationexperience
Instructor,publishedauthor&publicationsreviewerforWorldatWork
TeachesMarketPricing(C17)course
Author,leadeditor&managerofStrategicPaySeries
PeterScontrino,PhD
FounderandPrincipalatScontrinoPowell
PhDinIndustrialOrganizationalPsychology(MichiganStateUniv.)
30+yearsofexperience
LeadAuthorofStrategicPaySeriesPerformanceManagementToolkit
OverviewandAgenda
1.
2
2.
3.
4.
5.
6.
7.
Introduction,principalsandkeyconcepts(Peter)
Pricing and valuing jobs (Doug and Peter)
Pricingandvaluingjobs(DougandPeter)
Developingpayranges fundamentals
Geographicissuesandmultiplestructures
Assigningtherightpaygradeforthejob
Wrapupandsummary(DougandPeter)
Q&A
CompensationProgramDevelopment
StepstoBuildingaCashCompensationProgram
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
Prepare Goals,CompensationPhilosophy,etc.
Prepare
Goals Compensation Philosophy etc
SelectDataSources
GatherDocuments&Tools
MapJobs
Collect&AnalyzePayData
BuildSalaryStructures
Slot Jobs
SlotJobs
EvaluateResults
DevelopPolicies
Implement
Maintain&Update
CompensationPrinciples
Key Objectives for an Effective Pay System
performance.
It must motivate p
It should encourage people to develop the kind of skills
that will make them more productive, will enhance their
self-esteem/self-worth, and will help the organization
become more effective.
The pay system needs to attract and retain the right kind
of individuals for the organization.
It should reinforce the kind of behaviors the organization
needs in order to be effective.
5/11/2010
Compensation Principles
It should impact the culture of the organization in a
positive way. Some specifics could include:
- Have at worst a neutral impact on labor

management cooperation
- Contribute to teamwork or at least not get in
the way of teamwork
- Support the idea of life long learning as
appropriate
It should have some cost dimensions that are favorable
for the organization such as being competitive in the
marketplace.
5/11/2010
THE PSYCHOLOGY OF COMPENSATION
EQUITY
INTERNAL (inside the organization)
EXTERNAL (in the marketplace)
CREDIBILITY/TRUST
5/11/2010
INCENTIVE PAY REQUIREMENTS
CREATES A BELIEF AMONG EMPLOYEES THAT GOOD PERFORMANCE
WILL LEAD TO HIGH PAY
MINIMIZES THE PERCEIVED NEGATIVE CONSEQUENCES OF
PERFORMING WELL
INCLUDES RECOGNITION AS A KEY MOTIVATOR
CREATES CONDITIONS SUCH THAT POSITIVE OUTCOMES OTHER THAN
PAY WILL BE SEEN TO BE RELATED TO GOOD PERFORMANCE
KEY DECISION MAKERS HAVE CREDIBILITY
(From Ed Lawler, Strategic Pay)
5/11/2010
BuildingaCompensationFoundation
Prepare
Select Data
Sources
Map Jobs
Gather Documents
& Tools
Collect & Analyze

Pay Data
What well
cover today
Slot Jobs
Build Salary Structures
Evaluate Results
Develop Policies
Compensation
Program
Maintain & Update

Program
Implement
10
EstablishGoals&Objectives
Goals&ObjectivesofCompensationProgram
Knowwhatyou
Know what youre
replanningtoaccomplishbefore
planning to accomplish before youstart
you start
Todefine,askthequestions:
Whatarethekeygoalsofthecompensationprogram?
Whatdoyouwantthecompensationplantoaccomplish?
Ifyoudontknowwhereyouregoing,howareyougoing
toknowwhenyouvearrived?!?
11
GainExecutiveSupport&BuyIn
ExecutiveSupport&BuyIn
EssentialtohaveExecutivesupport!
Essential to have Executive support!
Withoutit,programcouldbedoomed
Obtainsupportbefore youembarkonthisinitiative
Programdevelopmentisahugeundertaking,andcouldbe
wastedtime&effortifyoudonthaveapprovalupfront
Simplyput,dontwaste
Si l
t d t
t yourtime&effortwithout
ti
& ff t ith t
Executivesupport!
12
1st DevelopaCompensationStrategy!
WhatisCompensationStrategy?
Compensationstrategyisthetotalcompensationand
rewardsapproachyourcompanychooses toundertaketo
bestattract,retainandmotivateitsworkforce,while
consideringitsfinancialresources,corporatevaluesand
strategicbusinessgoals.
13
CompensationStrategy(cont.)
WhyCompensationStrategyisCritical!
It
Itdefinesyourorganization
defines your organizationssoverallapproachto
overall approach to
compensatingitsworkforce,suchas:
Paystrategyrelativetotheexternalmarket
Mix&emphasisoftotalrewardselements
Basepay,variablepay,equity,benefits,etc.
Performance/meritdrivenvs.entitlement/equalrewards
14
CompensationPhilosophy
SampleCompensationPhilosophyStatement:
OurTotalRewardsPhilosophy(compensationphilosophy)
istoofferacompetitivebasepayandbenefitspackage,
whileofferingabovemarkettotalrewardsopportunity via
shorttermcashincentives(viaannualbonusprogram)and
longtermincentives(viastockoptionstoeligible
employees)"
15
DefineRelevantLaborMarkets(RLMs)
RelevantLaborMarket (RLM)
DefiningyourRLMsarecriticaltoacquiringthe
appropriatepaydatatoaccuratelyvalueyourjobs.
YourRLMsaredefinedby:
Whereyoutendtohireemployeesfrom
(andwhereyoutendtolosethemto)
Influencedbysuchfactorsas:
O
Occupation(differentjobshavedifferentRLMs)
ti (diff
tj b h
diff
t RLM )
Geography(differentgeographyRLMfordifferentjobs)
CompanySize(especiallyimportantforexecutiveroles)
Industry(especiallyforindustryspecificroles)
16
SelectingRelevantLaborMarkets
RelevantLaborMarketMatrixExample
RelevantGeography
JobType/Level
Local
Administrative&Clerical
Yes
OtherNonExempt/Hourly
Yes
Regional
OtherRelevantScope*Factors
National
Industry
OrganizationSize
Exempt/Professional
Yes
Yes(?)
Someroles
Limited
TechnicalProfessionals
Yes
Yes
Afew
Someroles
Limited
Yes
Yes
Some roles
Someroles
Some
Managers & Directors

Managers&Directors
VPs
Maybe
Sr.Execs(SVP+)
Yes
Yes
Yes
Yes
Yes
Yes
* Scope sensitivity refers to the degree to which a roles compensation is impacted by industry, company
size, etc.
17
SelectPayDataSources
WheretoFindPayData:
PublishedSurveys
Published Surveys (generallythebest&mostvalid)
(
ll th b t &
t lid)
Custom/PrivateSurveys(costly,butoftengoodforspecialized
roles/niches)
IndustryPublications (varyingquality,usecare)
InternetSources (usewithextremecare!)
Magazines,Agencies,Recruiter (usewithextremecare!)
SelfConductedSurveys(potentialantitrustissues)
AnecdotalData(usewithcare,butoftenhelpful)
18
ValuingJobs TwoBasicMethods
Therearetwoprimarymethodsfordeterminingjob
valueorworth:
Internal valueorworth(aka JobEvaluation)
Typicallyvaluedviaapointfactorsystemthatmeasuresthe
jobsvalueonvariouscompensablefactors
External valueorworth(aka TheMarket)
Typicallyvaluedviacomparingyourorganizationsbenchmark
jjobagainstrelevantpaydatabenchmarks.
g
p y
Over80%oforganizationstoday relyprimarilyor
exclusivelyfocusonexternalormarketvalue,sothat
iswhatwewillfocusontoday.
19
LocatingMarketPayDataSources
WaystoFindPayDataSources
AskyourHR/CompensationColleagues
Ask your HR/Compensation Colleagues
SurveyReferenceGuides
WorldatWork,IOMA,ERIswebsite(www.erieri.com),etc.
IndustryAssociations
WebSearching
Moreinformation&listofmajorsurveyprovidesavailablein
M
i f
ti & li t f
j
id
il bl i
ResourcesforIdentifyingSalarySurveys handout
20
10
SalarySurveyConsiderations
FactorstoConsider(whenSelectingSalarySurveys)
Cost
ScopeofSurvey
S
fS
Whatisthesurveystargetindustry,companies,etc.?
Whatbreakoutsareoffered?
JobCoverage
Doesthesurveycoverthemajorityofyourjobs?
Participation
How
Howmanycompaniesparticipateinthesurvey?
many companies participate in the survey?
Arethesurveyparticipantsappropriateforyourorganization?
(i.e.smallvs.largecompany)
SurveyMethodology
Howisthesurveyandconducted?
Collection,validation,analyzingpractices
21
GatherResourcesforMarketStudy
Documentstoassistwiththemarketstudy
OrganizationalCharts
JobDescriptions(JDs)
FullJDsaregreat,butthumbnailJDsaresufficient
Employee/JobDatafromHRIS
Ensureitsaccurate&uptodate
OtherImportantConsiderations
ProperFLSAclassification(Exempt/NonExempt)
EstablishJobFamilies/JobLevels
22
11
JobMappingorMatching
HowtoProperlyMatchYourJobs
Compareprimary duties&responsibilities
Surveyjobsarebroadlyfocused,soyouusuallywontgetan
exactmatchtoyourjobs.Focusoncorejobcontent
Ensuresignificantamountofjobcontentoverlap
>70%matchbetweenjobfunctions
CompanyJob
Survey
Job
Highdegreeof
overlapinjob
functions
23
JobMapping(cont.)
JobMappingPointers:
Avoidmatchingbasedonjobtitlealone
Titlescanbemisleading(bothcompany&surveytitles)
Matchtotheappropriatejoblevelinthesalarysurvey
Extremelyimportantforvalidityofmarketstudy
Leveldefinitioncanvaryfromsurveytosurvey
Matchasmanyjobsaspossible
W@Wrecommends50%,butweshootformuchhigher
ProperJobMatchingisCritical!
Itsthefoundationofthemarketstudy&willaffectthevalidity
ofyourprogram!
24
12
UnderstandingSurveyData
SurveyStatistics&Terms
Average(mean)
Simpleaverage:eachcompanygetsavote
Weightedaverage:eachincumbentgetsavote
Median
Middlemostvalueinagivendataset
Alsoknownasthe50th percentile
Averagevs.Median(whichtouse?)
Average vs Median (which to use?)
WeprefertheMedian
Lesssusceptibleofbeingskewedbyextremesinthedataset
Morereflectiveofmarket,sinceitsthecenterofdataset
25
MarketDataResults
SampleMarketDataResults
Survey 1
Survey1
JobTitle
#Co
Survey 2
Survey2
Salary
#Co
Salary
Survey 3
Survey3
#Co
Salary
Survey 4
Survey4
#Co
Salary
Survey 5
Survey5
#Co
Salary
AR/APSpecialistI
23
$38,383
241
$35,082
37
$35,933
23
$39,136
AR/APSpecialistII
30
$41,232
323
$38,048
115
$39,585
30
$42,978
AR/APSpecialist,Sr.
26
$45,194
258
$44,402
80
$43,387
26
$46,080
AccountantI
40
$54,864
236
$49,756
44
$48,288
22
$53,009
AccountantII
36
$67,020
337
$67,135
107
$59,792
$51,836
39
$61,831
Accountant,Sr.
31
$75,224
329
$77,882
95
$70,179
$85,917
39
$72,006
Smalldataset
Inconsistentwithdatafrom
othersurveysandlargegap
inpaybetweenlevels.
26
13
SalaryStructureExample
AGraphicalLookataSalaryStructure
Source:WorldatWork(reprintedwithpermission)
27
SalaryStructureComponents
ComponentsofaSalaryStructure
PayGrade&Ranges
Minimum,Midpoint,Maximum
PayRangeSpread(RangeWidth)
Distancebetweenminimum&maximumofthepayrange
RangeSpreadExample
Lower End Spread
Upper End Spread
-2 %
0
+2 %
0
$54,40
0
Minimum
$68,00
0
$8 ,60
1 0
Midpoin
t
Maximu
m
Full Range
Spread
= 50%
28
14
SalaryStructureComponents(cont.)
ComponentsofaSalaryStructure(cont.)
MidpointProgression
Theincreasebetweenmidpointsinthesalarystructure
The increase between midpoints in the salary structure
RangeOverlap
Thedegreetowhichadjacentpayrangesoverlap(thegreater
themidpointprogression,thelessoverlaptherewillbe
RangeOverlapExample
Minimal Overlap
Moderate Overlap
Max
Substantial Overlap
Max
Max
Max
Mid
Max
Max
Max
Mid
Max
Min
Mid
Mid
Mid
Mid
Max
Mid
Min
Min
Mid
Mid
Min
Min
Min
Min
Min
Min
29
BuildingaSalaryStructure
1)Determinethemidpointofthelowestgrade
Inthisexampleuse$30,000
p
Grade
Minimum
25th
Percentile
Midpoint
75th
Percentile
Maximum
Midpoint
Progression
RangeSpread
(Width)
15
14
13
12
11
10
$30 000
$30,000
30
15
BuildingaSalaryStructure(cont.)
2) Setmidpoints usingthedesiredmidpointprogression
Inthisexampleuse10%midpointprogression
Formulaforcalculatingmidpointprogression:
(MidpointofLowerGradexMidpointDifferential)+MidpointofLowerGrade=
MidpointofNextGrade
($30,000x10%)+$30,000=$33,000
Grade
Minimum
25th
Percentile
Midpoint
75th
Percentile
Maximum
Midpoint
Progression
15
$48,315
10%
14
$43,923
10%
13
$39,930
10%
12
$36,300
10%
11
$33,000
10%
10
$30,000
RangeSpread
(Width)
31
3)Setpayranges usingthedesiredrangespread
Inthisexampleuse50%rangespread
Formulaforcalculatingpaygrademinimum:
PayGradeMidpoint/(1+(DesiredRangeSpread))
$30,000/(1+(50%/2))=$24,000($30,000/1.25=$24,000)
Formulaforcalculatingpaygrademaximum:
PayGradeMinimumx(1+DesiredRangeSpread)
$24,000x(1+50%)=$36,000($24,000x1.5=$36,000)
25th
Percentile
75th
Percentile
Maximum
Midpoint
Progression
RangeSpread
(Width)
$48,315
$57,978
10%
50%
$43,923
$52,708
10%
50%
$31,944
$39,930
$47,916
10%
50%
12
$29,040
$36,300
$43,560
10%
50%
11
$26,400
$33,000
$39,600
10%
50%
10
$24,000
$30,000
$36,000
Grade
Minimum
15
$38,652
14
$35,138
13
Midpoint
50%
32
16
4)Calculatethe25thand75thpercentiles oftherange
Formulaforcalculatingthe25thpercentile:
(P G d Mid i t P G d Mi i
(PayGradeMidpoint+PayGradeMinimum)/2)
) / 2)
($30,000+$24,000)/2=$27,000
Formulaforcalculatingthe75thpercentile:
(PayGradeMaximum+PayGradeMidpoint)/2)
($36,000+$30,000)/2=$33,000
Grade
Minimum
25th
Percentile
Midpoint
75th
Percentile
Maximum
Midpoint
Progression
RangeSpread
(Width)
15
$38,652
$43,484
$48,315
$53,147
$57,978
10%
50%
14
$35,138
$39,531
$43,923
$48,315
$52,708
10%
50%
13
$31,944
$35,937
$39,930
$43,923
$47,916
10%
50%
12
$29,040
$32,670
$36,300
$39,930
$43,560
10%
50%
11
$26,400
$29,700
$33,000
$36,300
$39,600
10%
50%
10
$24,000
$27,000
$30,000
$33,000
$36,000
50%
33
SalaryStructureKeyConsiderations
KeyConsiderationsinDesigningSalaryStructure
1) What
Whatarethejobsandsalarylevelsthatthestructureneedsto
are the jobs and salary levels that the structure needs to
cover?
2) Howmanypaygradesdoyouneedorwanttohave?
3) Howmuchdistancedoyouwantbetweenpaygrades
(midpointprogression)?
4) Howwidedoyouwantyourpayrangestobe(rangespread)?
5) Howmuchoverlapdoyouwantbetweengrades(range
How much overlap do you want between grades (range
overlap)?
6) Howmanystructuresdoyouneed?
34
17
StructureCoverage
Whatarethejobs&salarylevelsthestructureneedstocover?
Paygradestoaccommodatealljobs,lowesttohighest
Canidentifybyexaminingmarketdata
Can identify by examining market data
Usemarketdatatodeterminemidpointsoftop&bottomgrades
Planforfutureneeds&buildintostructure
Additionaljobs
Marketgrowthoftopjobs
Salary Structure
DeterminingtheTop&BottomofSalaryStructure
Market Rate of
Highest Level Job
translates to
Midpoint of
Highest Grade
Minimum
Coverage
Market Rate of
Lowest Level Job
translates to
Midpoint of
Lowest Grade
35
NumberofPayGrades
Howmanypaygradesdoyouneedorwanttohave?
Systematicmeanstoconnectbottom&topofthestructure
Similartoaflightofstairs
Similar to a flight of stairs
Manysmallsteps(grades)w/littledistancebetween
Fewerlargesteps(grades)w/largerdistancebetween
SalaryStructureStairStepAnalogy
Many Stairs (Pay Grades)
Step
(Pay Grade)
I ncline
(Midpoint Progression)
Fewer Stairs (Pay Grades)
Top of the Stairs

(Last Pay Grade)
I ncline
(Midpoint Progression)
The steeper the incline

(midpoint progression), the
fewer steps (pay grades) that
are needed
The smaller the incline

(midpoint progression), the more
steps (pay grades) needed
Bottom of the Stairs
(First Pay Grade)
Top of the Stairs

(Last Pay Grade)
Step
((Pay
y Grade))
Bottom of the Stairs

(First Pay Grade)
36
18
MidpointProgression
Howmuchdistancebetweenpaygrades(midpointprogression)?
Smallermidpointprogression
Ad
Advantages
Ranges/midpointsmorecloselyrepresentthemarket
Disadvantages
Hardertoadminister
Littledistinctionbetweengrades,hardertoforinternalequity
Largermidpointprogression
Advantages
Easiertogroupjobs&segregatewhichjobsbelongineachgrade
Easier to group jobs & segregate which jobs belong in each grade
Disadvantages
Ranges/midpointsmaynotlikelytostrayfrommarket
Maynotbeenoughlevelstoaccommodatealljobfamilylevels
Somewhereinbetweenusuallyworksthebest
37
MidpointProgression(cont.)
Commonforpercentagetoincrease thehigherupthestructure
Reasonsjobs/levelsincreasehigherupthehierarchy:
Lowerlevels
Skillsrequiredtoadvancearelesscomplex&easiertoobtain
Advancetonextlevelquickly
Jobopportunitiesmoreavailable
Higherlevels
Skillsrequiredtoadvancemorecomplex&hardertoobtain
Incumbentsstayinjobforlongerperiodoftime
Advancementopportunitieslessavailable
38
19
MidpointProgression(cont.)
TypicalMidpointProgression
Sowhatconstitutesasmallorlargemidpointprogression?
Andwhatisatypicalamount?
TypicalMidpointProgressions
JobLevel
TypicalMidpointProgression
NonExempt
5% 10%
Exempt/Professional
/ f i
l
8% 15%
8%
%
Manager/Director
10% 15%
VP/Executive
15% 20%
39
RangeSpread
Howwidedoyouwantyourpayrangestobe(rangespread)?
Its
It scommonforrangestobemorenarrowatbottom&get
common for ranges to be more narrow at bottom & get
widerasitprogressesupward
Reasonsaretoaccommodatewiderrangesathigherlevels:
MarketElasticity
Lessvariationofpayatlowerlevels
Highervariationofpayathigherlevels(morenegotiationtoo)
TypicalTimeSpentinJob
Typical Time Spent in Job
Lessatlowerlevels
Moreathigherlevels needawiderrangetoaccommodate
40
20
RangeSpread(cont.)
TypicalRangeSpread
Sohowwideshouldwemakeourranges?
Andwhatisa
And what is a typical
typical amount?
amount?
TypicalRangeSpread
JobLevel
TypicalRangeWidth
NonExempt
20% 40%
Exempt/Professional
30% 60%
Manager/Director
/
40%
% 75%
%
VP/Executive
50% 100%
Remember,thepayrangerepresentstheamountyourewillingtopay,
sokeepthatinmindwhendeterminingthepayrangewidths.
41
NumberofStructures
Howmanystructuresdoyouneed?
Multiplestructuresareusedwhenthereissignificantdisparity
p
g f
p y
amongstgroups
Structuresarecommonlysegregatedby:
Joblevel(executive,exempt,nonexempt)
Functionalgroup(technical,scientific,etc.)
Geographiclocation (differentcostoflaborareas) thisisthemost
common reason for having multiple structures
commonreasonforhavingmultiplestructures
42
21
SampleSalaryStructure
Grade
Minimum
25th
Exempt Managerial&Professional
34
$116,920
$137,670
33
$107,080
$125,550
32
$98,070
$114,500
31
$89,830
$104,430
30
$82,290
$95,250
29
$75,380
$86,880
28
$69,060
$79,250
27
$63,270
$72,290
26
$58,500
$66,550
25
$54,090
$61,260
24
$50,020
$56,400
23
$46,270
$51,940
22
$42,790
$47,820
21
$39,580
$44,030
20
$36,610
$40,550
NonExempt/Hourly
15
$54 090
$54,090
$61 260
$61,260
14
$50,020
$56,400
13
$46,270
$51,940
12
$42,790
$47,820
11
$39,580
$44,030
10
$36,610
$40,550
9
$33,870
$37,340
8
$31,560
$34,680
7
$29,400
$32,200
6
$27,400
$29,900
5
$25,530
$27,770
75th
Midpoint
MidProgression
RangeSpread
$158,420
$144,020
$130,930
$119,030
$108,210
$98,370
$89,430
$81,300
$74,590
$68,430
$62,780
$57,600
$52,840
$48,480
$44,480
$179,180
$162,500
$147,360
$133,630
$121,170
$109,870
$99,620
$90,320
$82,640
$75,600
$69,160
$63,270
$57,870
$52,940
$48,420
Maximum
$199,930
$180,970
$163,780
$148,220
$134,130
$121,360
$109,810
$99,330
$90,680
$82,760
$75,530
$68,940
$62,900
$57,390
$52,350
10%
10%
10%
10%
10%
10%
10%
9%
9%
9%
9%
9%
9%
9%
9%
71.0%
69.0%
67.0%
65.0%
63.0%
61.0%
59.0%
57.0%
55.0%
53.0%
51.0%
49.0%
47.0%
45.0%
43.0%
$68,430
$68
430
$62,780
$57,600
$52,840
$48,480
$44,480
$40,810
$37,790
$34,990
$32,400
$30,000
$75,600
$75
600
$69,160
$63,270
$57,870
$52,940
$48,420
$44,290
$40,910
$37,780
$34,900
$32,240
$82,760
$82
760
$75,530
$68,940
$62,900
$57,390
$52,350
$47,760
$44,030
$40,570
$37,400
$34,470
9%
9%
9%
9%
9%
9%
8%
8%
8%
8%
53.0%
53
0%
51.0%
49.0%
47.0%
45.0%
43.0%
41.0%
39.5%
38.0%
36.5%
35.0%
43
JobSlottingFactors
JobGradingFactors
MarketWorth
Whatthejobisbeingpaidinthemarketplace
h h
b b
h
k l
InternalEquity
Relationshipbetweenjobsinjobfamily,department,organization
OrganizationalWorth
Importanceofjobinorganization
MarketWorth
OtherFactors
Hotskilljobs
Highdemand/shortsupply
Recruitingissues
JobFamily
E i
Equity
Other Factors
OtherFactors
Factorsto
Considerwhen
GradingJobs
Organizational
Worth
Departmental
Equity
Organizational
Equity
44
22
JobSlottingProcess
JobSlottingProcess
1)) SlotJobswith MarketData
Findpaygradewithmidpointclosesttomarketdata
Alsoconsiderinternalequity&otherfactors
2) ThenSlotJobswithout MarketData
Baseoninternalequityagainstpreviouslyslottedjobs
3) CompareandConsiderInternalEquityofallJobs
Comparableworthbetweenalljobs
bl
hb
ll j b
Smoothprogressionofgradesbetweenjobsinjobfamily
45
MarketStudyResultsEvaluation
Whenevaluatingthemarketstudyresults,evaluate:
1) Thepaygradecomparedtothemarketdata
2) Theincumbentspaycomparedtothemarketdata
Th i
b t
d t th
k td t
3) Wheretheincumbentspayfallswithinthesalaryrange
MarketStudyEvaluationTriangularApproach
Incumbent Pay
Salary Structure/
Pay Grade
Market Data
46
23
MarketStudyResultsEvaluation(cont.)
MarketStudyResultsEvaluation
SalaryStructurevs.Market
Salary Structure vs Market
Comparesthemidpointofeachpaygradeagainstthemarketdata
IncumbentPayvs.Market
Comparestheindividualspayagainstthemarketdata
IncumbentPayvs.SalaryStructure
Comparestheincumbentspay
Comparatio
PlacementinSalaryRange
47
ManagingEmployeePay
ManagingPayWithin theSalaryRange
Anemployeesplacementintherangeshouldbereflective
oftheirexperienceandperformancelevels
Lessexperienced/developing lowerendoftherange
Experienced/fullycompetent middleoftherange
Highlyexperienced/highperformer upperendoftherange
IdealPlacementinSalaryStructure
Pay
Grade
Inexperienced/
Developing
Experienced/
FullyCompetent
HighlyExperienced/
HighPerformer
Minimum
25th
Midpoint
75th
Maximum
12
$29,040
$32,670
$36,300
$39,930
$43,560
11
$26,400
$29,700
$33,000
$36,300
$39,600
10
$24,000
$27,000
$30,000
$33,000
$36,000
48
24
ManagingEmployeePay(cont.)
ManagingPayOutside theSalaryRange
Somepaymayfallbeloworabovethesalaryrange
Some pay may fall below or above the salary range
GreenCirclePay
Paythatisbelowtheminimum oftherange
Shouldusuallybebroughtuptoatleasttheminoftherange
RedCirclePay
Paythatisabovethemaximum oftherange
Shouldbefrozenuntilsalaryrangemoves&payfallswithinrange
y
g
p y
g
Sometimesgivenlumpsumpaymentsinlieuofmeritincreases
49
ForStepbyStepGuide&Templates:
TheStrategicPay
The
StrategicPaySeries
Series
BasePayToolkit
www.StrategicPaySeries.com
ForConsultingServices:
DougSayed,Principal
d
doug@appliedHRstrategies.com
@
li d
i
(425)8273881x701
PeterScontrino,Principal
mpeterscontrino@aol.com
i @ l
(425)3925694
25
CCMUpcomingEvents
ManagingFMLAIntermittentLeave:Howto
St Ab
StopAbuseandEnsureCompliance
dE
C
li
InternsandtheLaw:LegalInsandOutsofa
CompliantInternshipProgram
HowtoCalculateOvertimePay
Visitwww.c4cm.com formoreinformation!!!
26

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Base Pay Structures: How to Design an Accurate and Effective Compensation

Doug Sayed, Founder and Principal, Applied HR Strategies, Inc.

**Certificates of attendance and CEUs, when available,

Evaluation for CD Recording:

- Have at worst a neutral impact on labor

Collect & Analyze

Build Salary Structures

Maintain & Update

Managers & Directors

Upper End Spread

Fewer Stairs (Pay Grades)

Top of the Stairs

The steeper the incline

The smaller the incline

Top of the Stairs

Bottom of the Stairs

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